When you consider the advantages of a partnership, a business can actually gain a stronger footing in overall business operations. Although the decision to form a business partnership has its pros and cons, the result can be a great benefit.
The common fear for all start-up businesses is whether the business partners will get along or what are the risks associated with legal disputes. Besides the financial benefits, there are also risks.
Understanding the obligations to the business and to each partner is are critical elements of making a business start-up decision. Many new business owners make the decision to form a new business based on each person’s knowledge and previous success. However, the bulk of litigation and disputes arise from lack of understanding of how the business partnership is supposed to legally work.
Always make sure that you form the type of business partnership that aligns with your business operations to gain the full advantages of a partnership. For example, not all companies align with forming a limited partnership.
Other concerns involve doing business as a partnership versus a sole proprietor. As a sole proprietor you leave yourself exposed to personal liability for business debts. Alternatively, as a partnership, you do get some protection so long as you comply with state regulations about the business entity.
What are Some of the Advantages of a Partnership?
- Initial Start-up Cost. One of the advantages of a partnership is that each partner may be able to lower the start-up cost. Regardless of the type of business, there are some costs to start operations. If you are loaning money to the business, make sure that you have the required documents to get paid back. This includes a signed promissory note, security agreement and any type of written communication leading up to the loan.
- Credit Strength. Another of the many advantages of a partnership includes the ability to get credit. Each partner by themselves may not qualify for larger amounts of credit. However, when you have two partners, each person’s creditworthiness increases the partnership’s overall ability to borrow.
- Ability to Easily Change the Business Partnership’s Structure. Being able to restructure the business is yet another of the many advantages of a partnership. The formation allows more partners to join the business venture without having to reform the business entity.
Advantages of a Partnership Are Only as Effective as You Plan
The planning stages of a new partnership pave the road for the advantages. There cannot be enough said about the importance of doing your homework on potential business partners and to eventually execute a partnership agreement. Failure to do these important tasks can cause serious disputes and expensive litigation.
For help forming your new business and to learn more about the advantages of a partnership, call our business partnership law attorneys at 1-866-601-5518.